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02 Vision & Mission

03 Strategic Goals

05 Core Values / Business Ethics

06 Quality Policy

07 Environmental Protection

08 Social Obligations

10 Corporate Information

12 Seven Years at a Glance

13 Notice of Annual General Meeting

14 Chairmans Review & Directors Report

20 Compliance with Best Practices of

Transfer Pricing

21 Compliance with Best Practices of

Code of Corporate Governance

22 Auditors Report on Corporate Governance

23 Financial S tatements

55 Pattern of Holding of Shares

Form of Proxy

Contents

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Pioneer Cement Limited is

committed to make sustained

efforts towards optimum utilization

of its resources through good

corporate governance for serving

the interests of all its stakeholders.

Vision & Mission

Pioneer Cement Ltd.

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Customers satisfaction

Efficient deployment of resources

Optimization of cost

Research and development

Maximization of profits

Environmental protection

Strategic Goals

Committed to make sustained effortstowards optimum utilization

Pioneer Cement Ltd.

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Pioneer Cement Ltd.


Business Ethics

Transparency in transactions

Sound business policies

Judicious use of Companys resources

Avoidance of conflicts of interest

Justice to all

Integrity to all levels

Compliance of laws of the land

Core Values

Professional ethics

Respect and

courtesy

Recognition of

human assets

Teamwork

Innovations and

improvement

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Quality Policy

Pioneer Cement Limited is committed to produce high

quality cement as per International and Pakistan standards.

The management ensures that products of Pioneer Cementmeet and exceed the product quality requirements to

achieve customers satisfaction.

The Company is committed to abide by all applicable legal

and regulatory reqirements and shall strive for continual

improvement including prevention of pollution by establishingand monitoring of its Quality and Environmental objectives.

The Chief Executive and management are committed to

communicate and maintain this policy at all levels of the

Company, and achieve continual improvement throughteam work.

Pioneer Cement meets and exceeds theproduct quality requirements to achievecustomers satisfaction.

Pioneer Cement Ltd.

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Environmental

Protection

Ensuring environment friendlyoperations, products and services

Cement Industry is normally considered to be highly

un-friendly to the Environment because of its inherent processes

difficulties. However, with the development of technology,

our modern plants are equipped with dust collecting

equipments which help to reduce the pollution.

Due to conversion from oil firing system to coal firing, there

were chances that Pioneer Cement may suffer on account of

pollution. The Management realized that for introducing

Environmental ethics to meet the challenges, ISO 14001 is

the need of the day. Therefore, the Management with the

efforts of its employees succeeded in meeting the environmental

objectives and targets after evaluating legal requirements,

organizational aspects, technological options and other

requirements.

The C ompany a cquired the services of Moody International

for the assessment of audit. The audit has b een carried out

successfully and the auditors have recommended Pioneer

Cement Ltd for the Certification against ISO 14001

Environmental Management System. This shows the

commitment of the Management of PCL towards environmental

protection and prevention of pollution. PCL has been playing

its role towards the development of a better society and a

better future through continual improvement in the

Environmental Management System.

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Pioneer Cement Limited has been giving due importance toits social obligations particularly in areas surrounding thefactory:

Primary Schools of Boys and Girls were constructed in1995 in Chenki village and is being managed by theCompany.

A dispensary was established near the factory site to caterthe emergency requirements of the workers as well asvillagers residing in the vicinity of the factory.

A mosque has been constructed in Chenki village andis being maintained by the Company.

Metal road of 15 km length was re-constructed, raisedand widened to 30 feet for the residents of Jabbi andChenki villages.

Donations were extended for construction of educationalblock in District Public School, Khushab.

Donations were made to employees living in earthquakeaffected areas and also to the victims of these areas.

PCL is playing an active role in Khushab District IndustrialAssociation.

PCL is providing technical support to Vocational TrainingInstitute, Quaidabad.

In addition to fulfilling social obligations in the adjoiningareas, the Company also made donations to organizationslike TB centre, Family support programmes, Emergencyresponse centre and SOS schools.

Social Obligations

In addition to fulfilling social obligations inthe adjoining areas, the Company also madedonations to different organizations

Pioneer Cement Ltd.

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Corporate Information

Mr. Manzoor Hayat Noon

Chairman

Mr. Javed Ali Khan

Managing Director & CEO

Mr. K. Iqbal Talib

Director

Mr. Adnan Hayat Noon

Director

Mr. Salman Hayat Noon

Director

Mr. Wajahat A. Baqai

Director (Nominee NBP)

Mr. Rafique Dawood

Director (Nominee FDIB)

Mr. Cevdet DAL

Director

Mr. Etrat Hussain Rizvi

Director

Mr. Saleem Shahzada

Director

Pioneer Cement Ltd.

10 Annual Report 07

Board of Directors

Chairman

Mr. Manzoor Hayat Noon

Managing Director & CEO

Mr. Javed Ali Khan

Non-Executive Directors

Mr. K. Iqbal Talib



Mr. Wajahat A. Baqai (NBP)

Mr. Rafique Dawood (FDIB)

Independent Non-Executive Directors

Mr. Cevdet DAL


Mr. Saleem Shahzada

Audit Committee

Chairman

Mr. Rafique Dawood (FDIB)

Members




Mr. Wajahat A. Baqai (NBP)

Chief Financial Officer

Mr. Muhammed Saleem

Company Secretary

Syed Anwar Ali

Internal Auditor

Mr. Muhammad Zafar Qidwai

Senior Management

Mr. Jav ed Ali Khan M anaging Di rector & C EO

Mr. Usman Masud Khan Executive Director

Mr. Muhammed Saleem Chief Financial Officer

Mr. Nabeed Najum Executive Director (Operations)

Mr. Muhammed Nadeem Malik General Manager (Sales)

Mr. Jawaid Alam Khan General Manager (SCM)

Col. (Rtd.) Abdul Khaliq General Manager (Admin)

Statutory Auditors

Ford Rhodes Sidat Hyder & Co.

Cost Auditors

Siddiqui & Co.

Legal Advisors

Hassan & Hassan

Sayeed & Sayeed

Bankers

The Bank of Punjab

National Bank of Pakistan

Bank Islami Pakistan Limited

Hong Kong Shanghai Banking Corporation

Prime Commercial Bank Limited

Askari Commercial Bank Limited

Bank Al-Habib Limited

Habib Bank Limited

United Bank Limited

MCB Bank Limited

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HEAD OFFICE

7th Floor, Lakson Square Building No.3,

Sarwar Shaheed Road, Karachi, Pakistan.

Telephone (021) 5685052-55

Fax (021) 5685051

Email: [email protected]

REGISTERED OFFICE / MARKETING OF FICE

1st Floor, AlFalah Building, Shahrah-e-Quaid-e-Azam,

Lahore, Pakistan.

Telephone (042) 6284820-2

Fax (042) 6284823


SHARES DEPARTMENT

66, Garden Block, New Garden Town, Lahore, Pakistan.

Telephone (042) 5831462-63


FACTORY

Chenki, District Khushab, Punjab, Pakistan.

Telephone (0454) 720832-3

Fax (0454) 720832


SALES OFFICES

Bungalow No. 9, Civil Lines, Near Circuit House,

22, Khalid Bin Waleed Road, Sargodha.

Telephone 0451-722222

Office No. B-4, 1st floor, Town centre,

Main Abdara Road, University Town, Peshawar.

Telephone 091-5840577

WEBSITE www.pioneercement.com

Customers satisfaction is the strategic goalof the Company.

Pioneer Cement Ltd.


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20 06-0 7 2 00 5-0 6 20 04-0 5 2 003 -04 2 00 2-03 200 1-02 20 00 -0 1

PRODUCTION & SALES

Clinker Production Tons 1,238,168 769,397 69 0,529 458,545 441,321 439,221 401,473

Cement Production Tons 1,263,627 815,231 72 0,214 483,742 504,947 401,050 422,090

C eme nt S ale s - Dom es ti c M ark et Tons 1 ,136 ,9 58 71 6, 728 55 3, 461 4 78, 805 5 03, 28 4 3 96, 85 3 432 ,4 59

- Export 130,284 118,028 166,486 3,100 1,013 - -

1 ,267 ,2 42 83 4,756 71 9,947 4 81,9 05 5 04,29 7 3 96,85 3 432 ,4 59

Capacity Utilizati on 62% 77% 114 % 77% 80% 64% 67%

(based on installed ca pacity)

OPERATING R ESULTS

Gross Sales Rs.\Mn. 4 ,649 4,154 2,800 1,958 1,798 1,632 1,649

Excise Duty & Sales Tax Rs.\Mn. 1,415 1,027 734 614 730 616 637

Net Sales Rs.\Mn. 3,131 3,076 2,009 1,323 1,03 1 99 2 979

Gross Profit Rs.\Mn. 318 1,231 637 387 114 268 35

Net Profit/(Lo ss) Before Tax Rs.\Mn. (184) 933 394 238 (152) 50 (290)

Net Profit/(Lo ss) After Tax Rs.\Mn. (93) 676 332 424 (157) 44 (295)

FINANCIAL POSITION

Assets Emplo yed B y:

Op erati ng Assets Rs.\Mn. 7,511 7,683 6,382 3,657 3,648 3,80 6 3,832

Current Assets Rs.\Mn. 966 618 463 395 276 347 254

Other Assets Rs.\Mn. 133 104 44 223 24 28 38

Rs.\Mn. 8,610 8,405 6,888 4,275 3,948 4,18 1 4,124

Assets Finan ced By:

Shareho lders' Equity Rs.\Mn. 2,096 2,322 1,621 545 121 278 263

Surplus on Reval ua tion of Fi xed Assets Rs.\Mn. 574 605 629 - - - -

Long Term Loan/Deposits Rs.\Mn. 2,930 2,781 2,469 2,107 2,466 2,51 8 2,863

Deferred Liabilit ies Rs.\Mn. 1,010 1,299 1,179 1,239 1,027 799 569

Current Maturity Rs.\Mn. 1,251 659 117 196 202 224 224

Other Current Liabilit ies Rs.\Mn. 749 739 872 188 131 362 205

8,610 8,405 6,888 4,275 3,94 8 4,18 1 4,124

INVESTORS INFORMATION

Gross Profit to Sales 10 .2% 40.0% 31.7 % 29.2% 11.1% 27.02% 3.53%

Net Profit/(Lo ss) Before Tax to Sales (5.9%) 30.3% 19.6% 18.0% (14.8%) 5.0% (29 .6%)

Net Profit/(Lo ss) After Tax to Sa les (3%) 22.0% 16.5 % 32.1% (15.3%) 4.5% (30 .1%)

Return o n Assets (1.1%) 8.0% 4.8 % 9.9% (4.0%) 1.1% (7.1%)

Return o n Pa id up Capital (5.5%) 41.6% 21.5 % 44.5% (16.5%) 4.7% (30.9%)

Return o n Equity 4 .5% 29.1% 20.5 % 77.8% (130.1%) 16.0% (112 .0%)

Inventory Turno ver Ti mes 18.7 19.1 24.1 18.4 18.9 7.0 39.3

Asset Turnover Times 0.36 0.36 0.30 0.31 0.26 0.24 0.24

Deb t\Equity Rati o 52:48 48:52 52:48 86:14 97:3 93:7 93:7

Interest Coverage Ti mes 0.31 5.73 4.26 3.03 0.23 1.29 (0.15)

Current Rati o w ithout Pro ject Li abiliti es 0.56 0.56 0.92 1.03 0.83 0.59 0.59

Current Rati o w ith Project Liabil ities 0.48 0.44 0.47 - - - -

Earnings Per Share Rs. (0.55) 4.16 2.46 3.72 (1.65) 0.47 (3.09)

Market Value of Share (KSE) Rs. 37.40 45.65 20.35 20.10 7.5 0 3.1 5 2.35

Pioneer Cement Ltd.

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Notice is hereby given that the 21st Annual General Meeting of Pioneer Cement Limited will be held at 66 Garden Block, New

Garden Town, Lahore on Wednesday, October 31, 2007 at 11:30 a.m. to transact the following business:-

Ordinary Business

1. To confirm the minutes of th e Annual General Meeting held on October 30, 2006.

2. To receive, consider and adopt the audited accounts for the year ended 30 June, 2007 and the reports of the directors

and auditors thereon.

3. To appoint auditors for the year ending 30 June, 2008 and to fix their remuneration.

4. To transact any other business as may be placed before the meeting with the permission of the Chairman.

Closure Of Share Transfer Books

The share transfer books of the Company will remain closed from October 25, 2007 to October 31, 2007 (both days inclusive)

for the purpose of holding the annual general meeting.

By Order of the Board

SYED ANWAR ALIOctober 03, 2007 Company Secretary

Notes:

1. A m ember eligible to attend and vote at this meeting may appoint another member his/her proxy to attend, speak and

vote instead of him/her. Proxies in order to be effective must reach the Companys Registered office not less than 48 hours

before the time for holding the meeting. Representative of corporate members should bring the usual documents requiredfor such purpose.

2. The members, having physical shares are requested to provide copies of their CNIC and to notify change in their addresses,

if any.

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Mr. Manzoor Hayat NoonChairman

I give below my review and the director's report to the

shareholders for the financial year ended June 30, 2007

together with the Company's audited financial statements.

You are aware that by the Grace of Almighty Allah, your

Company was able to achieve a turnaround last year, when

it had posted a profit of Rs.675 million. The positive result of

the last year had generated optimism with regard to the

operations for the current year thereafter, unfortunately,

Company sustained a loss of Rs.93 million despite substantial

growth in sales volume.

A massive decline of 35% was recorded in average prices of

cement in the domestic market during the year 2006-07, overthe preceding year which has adversely affected the operating

results of Company for the year under review. Cost of production

on the other hand went up on account of increase in the price

of input items and an upward revision of power tariff.

Cement price, had tumbled during the current year, due to

fierce competition among cement manufacturers. Average net

retention price during last year worked out to Rs.3,685 per

ton which declined to Rs. 2,459 per ton during the year under

review.

Marketing

During the period the Company enhanced its distribution

network due to which, the Company was able to sell 1,141,267

tons during the year ended June 30, 2007 as against 716,727

tons sold during preceding year registering a rise of 59%. Due

to fierce competition prevailing in the cement market, the price

of cement continued to remain highly volatile, compelling the

Company to make adjustments in the prices almost on daily

basis. A price war has prevailed during the year under review

which caused a decline of about 50% in the net price of

cement.

ExportYour Company has exported 132,284 tons of cement as

compared to 118,028 tons of cement exported last year and

registered a rise of 12%. Due to depressed domestic market,

and a falling trend in the price of cement during the year under

review. The management is therefore trying to enhance export

of cement besides exploring the possibility of exporting clinker

in overseas market.

Pioneer Cement Ltd.

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Profitability of the Company is likely to improveif export to neighbor countries is allowed bythe government through the land route.

Production

Cement production during the period under review increasedby 55% to 448,394 tons. The Clinker production has

continuously been increasing, registering a rise 19% in the

first quarter, 51% in the second quarter and 93% in the thirdquarter.

Due to the managements continued efforts to optimize the

production and as result, production of clinker during the yearwas 1,238,168 tons as against capacity of 1,995,000 tons,

whereas production of cement during the year was 1,263,626

tons as against the capacity of 2,094,750 tons. Capacity

utilization of the plant remained at 74% during the year underreview as against 69% for the preceding year.

Additional Fin ancing

You will be pleased to know that National Bank of Pakistan

have disbursed Rs.500 million. The Bank of Punjab have also

disbursed Rs.250 million to liquidate the excessive currentliabilities of the Company and converted Rs.250 million as

Long Term Loan. The abovearrangements have partly resolved

the current ratio problem. Further the Company alreadyannounced 17.50% Right issue amounting to Rs. 359 million.

Future Outlook

An encouraging scenario which h as recently emerged is a

tremendous growth in demand of cement in the neighboringcountries. Export prices have shown an impressive recovery

during April-07 due to shortage of cement in the region

including India. Profitability of the Company is likely to improveif export to India is allowed by the government through the

land route.

Pioneer Cement Ltd.


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Since your Company is located close to this border, it canenormously benefit by exporting cement to the areas across

the border, where an acute shortage of cement has been

persisting. We have already applied for registration of ourbrand with the Bureau of India Standards. The local demand

is likely to rise as Government of Pakistan in the budget 2007-

08 has allocated Rs.543.26 million for Annual DevelopmentProjects.

Price hike of coal however, continues to remain a disturbingfactor in the wake of dramatic escalation in the internationalprices of coal.

Contribution to National Exchequer

Your Company has contributed Rs. 1,415 million to the National

Exchequer during the year under review, in the shape of ExciseDuty and Sales Tax alone.

The Company firmly believes in its Corporateresponsibilities towards the Society. As part of our

commitment to this cause the Company has providedline water, basic education and health facilities in the

adjoining areas of it factory. The additional earnings

expected from the expansion will enable the managementto further enhance its contribution to Society.

Corporate Social Responsibilities

Provident Fund / Gratuity Scheme

The Company has been maintaining Provident Fund and thesame is duly recognized by the Tax Authorities. As regardsGratuity Fund, application for approval has been submitted

to Income Tax Department.WTO Implication

The management feels that WTO regime will have no negativeimpact on the operations of the Company. On the other handit is felt that WTO might offer opportunities for exportingcement / clinker to the neighboring countries.

Business Ethics

The board has adopted the Statement of Business Ethics andPractices. All employees are informed of this statement andthey are required to follow them in all their business dealings.

Audit Committee

The audit committee appointed by the Board consists of fivenon-executive directors. The committee has been supervisingthe internal controls of the Company through internal auditdepartment and reviews the financial statements before theyare published.

Corporate and Financial Reporting Framework

The Board reviews the Company's strategic direction on regularbasis. The business plan and budgetary targets, set by th eBoard are also reviewed regularly. The Board is committed tomaintain a high standard of corporate governance and ensurefull compliance of the code of corporate governance enforcedby the securities & exchange commission of Pakistan throughlisting rules of stock exchange where the shares of theCompanyare traded.

Your directors are pleased to report that:

a) The financial statements, prepared by the management,

present fairly its state of affairs, the result of its operations,

cash flow and change in equity.

b) Proper books of account have been maintained by the

Company.

c) Appropriate accounting policies have been consistently

applied in preparation of financial statements andaccounting estimates are based on reasonable and prudent

judgment.

d) International Accounting Standard as applicable in Pakistan,

have been followed in preparation of financial statements.

e) The existing internal control system and procedure arecontinuously reviewed by the internal auditors. The process

of review will continue by the audit committee to monitor

the effective implementation.

f) There are no significant doubts upon the Company's

ability to continue as a going concern.

g) There has been no material departure from the bestpractices of corporate governance, as detailed in thelisting regulation of stock exchanges.

h) Key operating and financial data of last seven yearsannexed.

i) The un-audited value of investment of provident fund as

on June 30, 2007 is Rs. 67 million.

Five board meetings were held during the years whichwere attended by the Directors, as under:

No. of MeetingsAttended During

The Year

Mr. Manzoor Hayat Noon 5

Mr. Javed Ali Khan 5

Mr. K. Iqbal Talib 5

Mr. Adnan Hayat Noon 2

Mr. Salman Hayat Noon 3

Mr. Cevdet Dal 2

Mr. Etrat Hussain Rizvi 4

Mr. Saleem Shahzada 5

Mr. Wajahat A. Baqai 5

Mr. Rafique Dawood 5

Board Meetings

Pioneer Cement Ltd.

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Shareholdings

Aggregate Number of Shares h eld by:

i) The Directors/CEO and their spouse and minor children

Name Own self Spouse Minor children

Mr. Manzoor Hayat Noon 69,906,235 40,894 Nil

Mr. Javed Ali Khan 2,079,040 Nil Nil

Mr. K. Iqbal Talib 1,389,231 Nil Nil

Mr. Adnan Hayat Noon 68,146 Nil Nil

Mr. Salman Hayat Noon 65,845 Nil Nil

Mr. Cevdet Dal 87,640 Nil Nil

Mr. Etrat Hussain Rizvi 6,584 Nil Nil

Mr. Saleem Shahzada 137,187 Nil Nil

Mr. Rafique Dawood (FDIB Nominee) 16,460 Nil Nil

Mr. Wajahat A. Baqai (NBP Nominee) Nil Nil Nil

ii) Executives 252,491 shares

iii) Shareholders holding more than 10% of the total issued capital:

Mr. Manzoor Hayat Noon, Chairman 69,906,235 shares

The above shareholding includes 4.5117% Bonus Shares allotted by the Company during the year.

iv) Trading in the shares by the Directors, CEO, CFO and Company Secretary

Sale Purchase

Mr. Cevdet Dal 8,000,000 -

Mr. Saleem Shahzada 904,988 -

Mr. Badruddin Fakhri (Ex. CFO) 94,600 65,000

v) Shareholding of CEO in associated company's shareholding

Names of Associated Companies No. of Shares

1. Noon Sugar Mills Ltd 2,803

2. Noon Pakistan Ltd 872

3. Noon Pakistan - Preference Shares 720

Pioneer Cement Ltd.


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Graphic Presentation of Performance

Tons in 000

Volume of Cement Sales

Pioneer Cement Ltd.

18 Annual Report 07

Years

97

679

07

1,267

98

536

99

446

00

462

01

432

02

397

03

504

04

482

05

720

06

835

Years

Rs./Million

Net Profit / (Loss) after Tax

97

294

07

93

98

231

99

2

00

71

01

295

02

44

03

157

04

424

05

332

06

676

Production Cost 2006-07

Fuel

Power

Raw & Packing Material

Salaries

Dep.& Overheads

Admin & Selling

Financial Charges

31%

16%

15%

6%

17%

4%

11%

Revenue 2006-07

Net Sales

Excise duty & Sales Tax

Commisssion

68%

1%

31%

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The environment and safety aspects are at thecore of management priorities.

Pioneer Cement Ltd.


Human Capital

The Company recognizes that its human resource is the mostvaluable asset and special care is taken to reward those whodo well for the Company, and to create conducive environmentfor others to perform better. Human resource is at the heartof our core values which were approved by the Board in prioryears.

Safety, Health and Environment

The management of PCL took up this project in the year 2002and achieves ISO 14001 Certification from Moody InternationalCertification Ltd. The environmental and safety aspects are atthe core of management priorities.

Dust Emission33 Dust Collectors installed at several locations of plant areworking very efficiently.

Gaseous Emission

During coal conversion, 3rd generation coal firing burner wasselected which consumes less primary air thus reducing theenvironmental pollution by lower Nitrogen Oxide and CarbonMonoxide emission. An electrostatic precipitator is installedwhich also reduces dust pollution.

Noise

Noise pollution is an inherent problem with the cement

manufacturing plants, therefore protective gadgets have beenprovided to the employees for protection against noise.

Safety

Safety and health protection devices have been developedwhich monitor these aspects and point out the potentialhazards. Theses are reviewed and all necessary preventativemeasures are taken to avoid accidents.

Audito rs

M/s Ford Rhodes Sidat Hyder & Co. being the retiring auditorshave offered their services for another term.

Acknowledgement

We give high value of the customers satisfaction. We wouldlike to express our thanks to our customers for their confidenceon our quality and assure that the Company will continue tosupply quality cement to our customers.

We are grateful to all the lenders namely Asian Development

Bank, Asian Finance & Investment Corporation Ltd., NationalBank of Pakistan, Bankers Equity Ltd, Industrial Developmentof Pakistan and Saudi Pak Industrial & Agricultural InvestmentCo (Pvt) Ltd. who have extended support in completion of thesecond production line of the Company. We are also gratefulto the Bank of Punjab, Bank Islami Pakistan Ltd and HongKong Shanghai Banking Corporation, First Dawood InvestmentBank Ltd., Orix Investment Bank Pakistan Ltd and First Credit& Investment Bank Ltd for their support and cooperation withthe Company.

Thanks are due to the dealers, builders and suppliers for theircooperation. Thanks are also due to the employees for theirdedication and hard work.

MANZOOR HAYAT NOONCHAIRMAN

October 03, 2007Lahore

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Pioneer Cement Ltd.

20 Annual Report 07

The Company has fully complied with the Best Practices on Transfer Pricing as contained in the Listing Regulationsof the Stock Exchanges in Pakistan.

On Behalf of the Board

JAVED A LI KHAN

Chief Executive


Compliance with Best Practices of

Transfer Pricing

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Pioneer Cement Ltd.


Compliance with Best Practices of

Code of Corporate Governance

This statement is being presented to comply with the Code of

Corporate Governance contained in the listing regulations ofKarachi, Lahore and Islamabad Stock Exchanges for the

purpose of establishing a frame work of good governance,

whereby a listed company is managed in compliance with thebest practices of corporate governance.

The Company has applied the principles contained in thecode in the following manner:

1. The Company encourages representation of independentnon-executive directors. At present the Board includes

nine non-executive directors.

2. The directors have confirmed that none of them is serving

as a director in more than ten listed companies including

this Company.

3. All the resident directors of the Company are registered

as tax payers and none of them has defaulted in paymentof any loan to a banking company, a DFI or an NBFI or,

being a member of a stock exchange, has been declared

as a defaulter by that stock exchange.

4. The Company has prepared a Statement of Ethics and

Business Practices, which has been signed by all thedirectors and officers of the Company.

5. The Board has developed a vision/mission statement,overall corporate strategy and significant policies of the

Company. A complete record of particulars of significant

policies along with the dates on which they were approvedor amended has been maintained.

6. All the powers of the Board have been duly exercisedand decision on material transactions, including

appointment and determination of remuneration and

terms and conditions of employment of the CEO havebeen taken by the Board.

7. The meetings of the Board are presided over by theChairman whenever present. The Board met atleast once

in every quarter. Written notices of the Board meetings,

alongwith agenda and working papers, were appropriatelycirculated before the meetings. The minutes of the meetings

were recorded and circulated amongst the directors.

8. Directors are well conversant with the listing regulations

and legal requirements and as such are fully aware of

their duties and responsibilities. The Board has beengiven a presentation on the Code.

9. The Board has confirmed the appointments of CFO,Company Secretary and Head of Internal Auditor and

the terms and conditions of employment, as determined

by the CEO.

10. The directors report has been prepared in compliance

with the requirements of the Code and fully describes thesalient matters required to be disclosed.

11. The financial statements of the Company were dulyendorsed by the CEO and CFO before approval of the

Board.

12. The directors, CEO and executives do not hold any

interest in the shares of the Company other than that

disclosed in the pattern of shareholding.

13. The Company has complied with all the corporate and

financial reporting requirements of the Code.

14. The Board has formed an audit committee, comprising

of four members, all of whom are non-executive directors.

15. The meetings of the audit committee were held at least

once every quarter prior to approval of interim and finalresults of the Company as required by the Code.

16. The Board has set up an effective internal audit function.

17. The statutory auditors of the Company have confirmed

that they have been given a satisfactory rating under theQuality Control Review programme of the Institute of

Chartered Accountants of Pakistan, that they or any of

the partners of the firm, their spouses and minor childrendo not hold shares of the Company and that the firm

and all its partners are in compliance with International

Federation of Accountants (IFAC) guidelines on code ofethics as adopted by Institute of Chartered Accountants

of Pakistan.

18. The statutory auditors or the persons associated with them

have not been appointed to provide other services except

in accordance with the listing regulations and the auditorshave confirmed that they have observed IFAC guidelines

in this regard.

19. We confirm that all other material principles contained

in the Code have been complied with.

On Behalf of the Board

JAVED ALI KHANChief Executive


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Review Report to the Members on Statementof Compliance with Best Practices of Code

of Corporate Governance

We have reviewed the Statement of Compliance with the best

practices contained in the Code of Corporate Governance

prepared by the Board of Directors of Pioneer Cement Limited(the Company) to comply with the Listing Regulations No. 37

of the Karachi Stock Exchange, Chapter XIII of the LahoreStock Exchange and Chapter XI of the Islamabad Stock

Exchange, where the Company is listed.

The responsibility for compliance with the Code of CorporateGovernance is that of the Board of Directors of the Company.

Our responsibility is to review, to the extent where suchcompliance can be objectively verified, whether the Statement

of Compliance reflects the status of the Companys compliance

with the provisions of the Code of Corporate Governanceand report if it does not. A review is limited primarily to inquiries

of the Company personnel and review of various documents

prepared by the Company to comply with the Code.

As part of our audit of financial statements we are required

to obtain an understanding of the accounting and internalcontrol systems sufficient to plan the audit and develop an

effective audit approach. We have not carried out any specialreview of the internal control system to enable us to express

an opinion as to whether the Boards statement on internal

control covers all controls and the effectiveness of such internal

controls.

Based on our review, nothing has come to our attention whichcauses us to believe that the Statement of Compliance does

not appropriately reflect the Companys compliance, in all

material respects, with the best practices contained in theCode of Corporate Governance, as applicable to the Companyfor the year ended June 30, 2007.

CHARTERED ACCOUNTANTS

October 03, 2007

Karachi

Pioneer Cement Ltd.22 Annual Report 07

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Pioneer Cement Ltd.03A nn ua l Rep or t 0 7

Pioneer Cement Ltd.03A nn ua l Rep or t 0 7

Auditors Report to the Memebers 24

Balance Sheet 25

Profit and Loss Account 26

Cash Flow Statment 27

Statement of Changes in Equity 28

Notes to the Financial Statements 29

Financial Statementsfor the year ended June 30, 2007

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Auditors Report to the Members

We have audited the annexed balance sheet ofPioneer Cement Limited (the Company) as at June 30, 2007 and the relatedprofit and loss account, cash flow statement and statement of changes in equity together with the notes forming part thereof, forthe year then ended and we state that we have obtained all the information and explanations which, to the best of our knowledgeand belief, were necessary for the purposes of our audit.

It is the responsibility of the Companys management to establish and maintain a system of internal control, and prepare andpresent the above said statements in conformity with the approved accounting standards and the requirements of the CompaniesOrdinance, 1984. Our responsibility is to express an opinion on these statements based on our audit.

We conducted our audit in accordance with the auditing standards as applicable in Pakistan. These standards require that weplan and perform the audit to obtain reasonable assurance about whether the above said statements are free of any materialmisstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the above saidstatements. An audit also includes assessing the accounting policies and significant estimates made by management, as well as,evaluating the overall presentation of the above said statements. We believe that our audit provides a reasonable basis for ouropinion and, after due verification, we report that:

(a) in our opinion, proper books of account have been kept by the Company as required by the Companies Ordinance,1984;

(b) in our opinion:

(i) the balance sheet and profit and loss account together with the notes thereon have been drawn up in conformitywith the Companies Ordinance, 1984, and are in agreement with the books of account and are further inaccordance with accounting policies consistently applied;

(ii) the expenditure incurred during the year was for the purpose of the Companys business; and

(iii) the business conducted, investments made and the expenditure incurred during the year were in accordance withthe objects of the Company;

(c) in our opinion and to the best of our information and according to the explanations given to us, the balance sheet, profitand loss account, cash flow statement and statement of changes in equity together with the notes forming part thereofconform with approved accounting standards as applicable in Pakistan, and, give the information required by theCompanies Ordinance, 1984, in the manner so required and respectively give a true and fair view of the state of theCompanys affairs as at June 30, 2007 and of the loss, its cash flows and changes in equity for the year then ended;

(d) in our opinion Zakat was deductible at source under the Zakat and Ushr Ordinance, 1980 (XVIII of 1980), was deductedby the Company and deposited in the Central Zakat Fund establish under section 7 of that Ordinance.

KARACHI: CHARTERED ACCOUNTANTSOctober 03, 2007

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Balance Sheetas at June 30, 2007

CHIEF EXECUTIVE CHAIRMAN

Note 2007 2006(Rupees in '000')ASSETSNON-CURRENT ASSETSFIXED ASSETSProperty, plant and equipment 5 7,510,640 7,683,391Long term loans 6 7,248 5,064Long term deposits 7 126,317 97,5097,644,205 7,785,964CURRENT ASSETSStores, spare parts and loose tools 8 416,586 375,858Stock-in-trade 9 150,294 96,757

Assets held for disposal 10 32,847 32,847Trade debts - unsecured, considered good 29,717 12,490Loans and advances 11 24,629 17,599Trade deposits and short term prepayments 12 1,041 1,550Other receivables 13 229 1,756Current portion of long term deposits 1,950 1,300Sales tax - net 3,507 -Taxation - net - 7,368Cash and bank balances 14 305,492 71,905966,292 619,430TOTAL ASSETS 8,610,497 8,405,394EQUITY AND LIABILITIESSHARE CAPITAL AND RESERVES

Authorized capital 15 2,500,000 2,500,000Issued, subscribed and paid-up capital 16 1,698,148 1,624,839Reserves 398,076 697,2242,096,224 2,322,063SURPLUS ON REVALUATION OF FIXED ASSETS 17 574,203 604,342NON-CURRENT LIABILITIESLong term financing 18 72,603 430,663Liabilities against assets subject to finance lease 19 486,577 454,070Long term Musharaka finance 20 50,000 50,000Long term deposits 21 5,247 5,627Long term creditor 22 21,497 29,008Deferred liabilities 23 1,010,587 1,298,856Long term loans 24 2,293,709 1,812,0633,940,220 4,080,287CURRENT LIABILITIESCreditors against expansion project 25 283,428 308,934Trade and other payables 26 392,894 361,701Interest / mark up accrued 72,176 42,463Short term Murabaha 27 99,720 -Current portion of long term liabilities 28 1,150,772 658,885Sales tax - net - 26,719Taxation - net 860 -1,999,850 1,398,702CONTINGENCIES AND COMMITMENTS 29TOTAL EQUITY AND LIABILITIES 8,610,497 8,405,394

The annexed notes from 1 to 50 form an integral part of these financial statements.

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Profit and Loss Accountfor the year ended June 30, 2007


Note 2007 2006(Rupees in '000')

Gross turnover 30 4,648,655 4,153,574Excise duty 857,096 537,546Sales tax 557,863 489,764Commission 48,278 22,694Freight and handling charges 53,931 27,648

1,517,168 1,077,652Net turnover 3,131,487 3,075,922Cost of sales 31 2,813,309 1,845,284Gross profit 318,178 1,230,638Distribution costs 32 54,474 39,220

Administrative expenses 33 86,876 73,999Other operating income 34 (11,687) (71,163)Finance costs 35 365,848 196,949Other operating expenses 36 7,108 58,562(Loss) / profit before taxation (184,441) 933,071Taxation 37 90,947 (257,089)(Loss) / profit after taxation (93,494) 675,982

(Rupees) (Rupees)Restated

(Loss) / earnings per share - Basic and diluted 38 (0.55) 3.98

The accounting policies and explanatory notes from 1 to 50 form an integral part of these financial statements.

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Cash Flow Statementfor the year ended June 30, 2007


Note 2007 2006(Rupees in '000')CASH FLOWS FROM OPERATING ACTIVITIES(Loss) / profit before taxation (184,441) 933,071

Adjustments for non cash and other items:Depreciation 375,728 277,435Un realized gain on fair value of derivative - (30,716)Realized gain on settlement of derivative - (38,250)Provision for gratuity and compensated absences 20,037 20,385Finance cost 365,848 196,949Profit on disposal of fixed assets (2,720) (480)Workers' Profits Participation Fund - 49,109Reversal of provision for duty drawback on Export 985 -Exchange loss 5,150 7,119

765,028 481,551Cash flow before working capital changes 580,587 1,414,622Movement in working capital(Increase)/decrease in current assets:

Stores, spares and loose tools (40,727) (109,718)Stock-in-trade (53,536) (39,932)Trade debts (17,227) 6,454Loans and advances (7,030) 47,982Deposits and prepayments 509 285Other receivables 542 4,777

(117,469) (90,152)(Decrease)/increase in current liabilities:

Creditors against expansion project (36,880) (200,880)Trade and other payables 66,596 66,731Sales tax payable (30,226) 7,988

(510) (126,161)(117,979) (216,313)Cash generated from operations 462,608 1,198,309

Finance cost paid (390,037) (210,680)Workers' Profits Participation Fund paid (53,345) (22,433)Income tax paid (10,072) (12,839)Gratuity and compensated absences paid (13,101) (8,840)Dividend paid (160,772) (30)

(627,327) (254,822)Decrease in long term loans (2,185) 1,654Decrease in long term deposits - net (29,838) (63,046)Net cash (outflow) / inflow from operating activities (196,742) 882,095CASH FLOWS FROM INVESTING ACTIVITIES

Capital expenditure (239,634) (1,574,195)Proceeds from sale of fixed assets 4,274 636Net cash used in investing activities (235,360) (1,573,559)

CASH FLOWS FROM FINANCING ACTIVITIESLong term loans 734,662 165,943Long term finance (293,055) 300,000Proceeds from Murabaha finance 99,720 -Liabilities against assets subject to finance lease - net of repayments 124,362 299,897Short term borrowings - (20,000)

Net cash inflow from financing activities 665,689 745,840Net increase in cash and bank balances 233,587 54,376Cash and bank balances at the beginning of the year 71,905 17,529Cash and bank balances at the end of the year 14 305,492 71,905The annexed notes from 1 to 50 form an integral part of these financial statements.

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Statement of Changes in Equityfor the year ended June 30, 2007


Issued, Capital Revenuesubscribed reserve reserveand paid-up Share Accumulated Total Totalcapital premium (loss)/profit reserves equity(Rupees in '000')

Balance as at June 30, 2005 1,547,466 150,682 (77,039) 73,643 1,621,109

Issue of bonus shares @ 1 share per

20 shares held 77,373 (77,373) - (77,373) -

Profit for the year after taxation - - 675,982 675,982 675,982

Surplus on revaluation of fixed assets realized

through incremental depreciation charged on

related assets for the year net of tax - - 24,972 24,972 24,972

Balance as at June 30, 2006 1,624,839 73,309 623,915 697,224 2,322,063Issue of bonus shares @ 4.51 shares per

100 shares held 73,309 (73,309) - (73,309) -Loss for the year after taxation - - (93,494) (93,494) (93,494)Dividend for the year 2005-2006

@ Re. 1 per share - - (162,484) (162,484) (162,484)Surplus on revaluation of fixed assets realized

through incremental depreciation charged onrelated assets for the year net of tax - - 30,139 30,139 30,139

Balance as at June 30, 2007 1,698,148 - 398,076 398,076 2,096,224

The annexed notes from 1 to 50 form an integral part of these financial statements.

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Notes to the Financial Statementsfor the year ended June 30, 2007

1. LEGAL STATUS AND NATURE OF BUSINESS1.1. The Company was incorporated in Pakistan as a public limited company by shares on February 09, 1986. Its shares are quoted on all

stock exchanges in Pakistan. The registered office of the Company is situated at 1st Floor, Alfalah Building, Shahrah-e-Quaid-e-Azam,

Lahore. The principal activity of the Company is manufacturing and sale of cement.

1.2. The Company commenced its operation with an installed capacity of 2,000 tons per day clinker. During 2005, the capacity was optimizedto 2,350 tons per day. During the year ended June 30, 2006, another production line of 4,300 tons per day clinker capacity was

completed which started commercial operations from April 2006.

1.3. In order to improve its liquidity and profitability of the Company, the management is planning to take certain appropriate steps such asincrease sales through export of cement to neighboring countries and curtailing financing cost by means of issuing right shares and using

other options.

2. BASIS OF PREPARATION OF THE FINANCIAL STATEMENTSThese financial statements have been prepared in accordance with the approved accounting standards as applicable in Pakistan and the

requirements of the Companies Ordinance, 1984 (the Ordinance). Approved accounting standards comprise of such International FinancialReporting Standards (IFRSs) as notified under the provisions of the Ordinance. Wherever the requirements of the Ordinance or directives issued

by the Securities and Exchange Commission of Pakistan (SECP) differ with the requirements of these standards, the requirements of the Ordinance

or the requirements of the said directives take precedence.

3. ACCOUNTING CONVENTIONThese financial statements have been prepared under the 'historical cost' convention, except for revaluation of certain fixed assets, capitalization

of borrowing cost and exchange differences, certain financial instruments which are stated as per the requirements under IAS-39 "Financial

Instruments: Recognition and Measurement" and recognition of certain staff retirement benefits at present value.

4. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES4.1. Significant accounting judgments and estimates

The preparation of financial statements in conformity with approved accounting standards requires the use of certain critical accounting

estimates. It also requires management to exercise its judgments in the process of applying the Company's accounting policies. Estimates

and judgments are continually evaluated and are based on historic experience and other factors, including expectations of future events

that are believed to be reasonable under the circumstances. Revisions to accounting estimates are recognized in the period in which the

estimates is revised and in any future periods effective. In the process of applying the Company's accounting policies, management has

made the following estimates and judgments which are significant to the financial statements:

(a) recognition of taxation and deferred tax (notes 4.14 & 37);

(b) determining the residual values and useful lives of property, plant and equipment (notes 4.2, 4.7, 5.1 & 17);

(c) accounting for post employment benefits (notes 4.9 & 23.2); and

(d) impairment of inventories / adjustment of inventories to their Net Realizable Value (note 4.4 & 4.19).

4.2 Property, plant and equipmentOperating fixed assetsOwnedThese are stated at cost or revalued amount less accumulated depreciation and accumulated impairment losses, if any, except freehold

land which is stated at cost.

Depreciation is calculated at the rates specified in note 5.1 to the financial statements on straight line method except plant and machinery

and coal firing system on which depreciation is charged on the basis of units of production method. The net exchange differences relatingto an asset at the end of each year are amortised over its remaining useful life. Depreciation on additions is charged from the month in

which the asset is available for use and on disposals upto the month of disposal. Assets' residual values and useful lives are reviewed and

adjusted, if appropriate at each balance sheet date.

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Maintenance and normal repairs are charged to profit and loss account as and when incurred. Major renewals and improvements are

capitalized. Gains and losses on disposal of assets, if any, are included in the profit and loss account.

Assets subject to finance leaseThese are stated at lower of present value of minimum lease payments under the lease agreements and the fair value of the assets acquired

on lease. The outstanding obligations under the lease less finance charges allocated to future periods are shown as liability. Financial

charges are calculated at the interest rate implicit in the lease and are charged to the profit and loss account. Depreciation is charged to

profit and loss account applying the same basis as for owned assets.

Capital work in progressThese are stated at cost including capitalization of borrowing costs. It consists of expenditures incurred and advances made in respect of

fixed assets in the course of their construction and installation.

4.3. Stores, spare parts and loose toolsThese are valued at lower of moving average cost and net realizable value, except for furnace oil and coal, which are valued at average

cost. Cost comprises invoice value and other direct costs but excludes borrowing costs. Items in transit are valued at cost comprising

invoice value plus other charges incurred thereon.

Net realisable value is the estimated selling price in the ordinary course of business less estimated costs necessary to make a sale.

4.4 . Stock-in-tradeThese are stated at the lower of cost and net realizable value. The methods used for the calculation of cost are as follows:

i) Raw and packing material - at average cost comprising of quarrying/purchase price, transportation,

government levies and other overheads.

ii) Work in process and finished goods - at average cost comprising direct cost of raw material, labour and other

manufacturing overheads.

Net realizable value signifies estimated selling price in the ordinary course of business less estimated cost necessary to make the sale.

4.5. Trade debts and other receivablesTrade debts and other receivables are stated at original invoice amount less provision for doubtful debts, if any. A provision for doubtful

debts/ other receivables is based on the management's assessment of customers' outstandings and credit worthiness. The amount of the

provision is recognised in the profit and loss account. Trade debts and other receivables are written off when considered irrecoverable.

4.6. Cash and cash equivalentsFor the purpose of cash flow statement, cash and cash equivalents comprise of cash in hand and current, PLS and deposit accounts with

commercial banks.

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4.7. Surplus on revaluation of fixed assetsThe surplus arising on revaluation of fixed assets is credited to the "Surplus on Revaluation of Fixed Assets account" shown below equity

in the balance sheet in accordance with the requirements of section 235 of the Companies Ordinance 1984. The said section was

amended through the Companies (Amendment) Ordinance, 2002 and accordingly the Company has adopted the following accounting

treatment of depreciation on revalued assets, keeping in view the Securities and Exchange Commission of Pakistan's (SECP) SRO

45(1)/2003 dated January 13, 2003:

- depreciation on assets which are revalued is determined with reference to the value assigned to such assets on revaluation and

depreciation charge for the year is taken to the profit and loss account; and

- an amount equal to incremental depreciation for the year net of deferred taxation is transferred from "Surplus on Revaluation of Fixed

Assets account" to accumulated profit through Statement of Changes in Equity to record realization of surplus to the extent of the

incremental depreciation charge for the year.

4.8. Long term and short term borrowingsThese are recorded at the proceeds received. Financial charges are accounted for on accrual basis and are disclosed as accrued

interest/mark-up to the extent of the amount remaining unpaid.

4.9. Employees' benefitsDefined benefit planThe Company operates an unfunded gratuity scheme for all its permanent employees, who have completed the minimum qualifying period

of service, which provides for a graduated scale of benefits dependent on the length of service of the employee. The contributions to the

scheme are made in accordance with actuarial valuation using Projected Unit Credit method.

The amount recognised in the balance sheet represents the present value of defined benefit obligations as adjusted for unrecognised

actuarial gains and losses.

Actuarial gains and losses are recognised as income or expense when the cumulative unrecognised actuarial gains or losses exceed

10 percent of the defined benefit obligation as of the end of previous reporting period. These gains or losses are recognised over the

expected remaining working lives of the employees participating in the scheme.

Defined contribution planThe Company also operates an approved contributory provident fund for all its permanent employees who have completed the minimum

qualifying period of service and equal monthly contributions are made both by the Company and the employees at the rate of 10 percent

of basic salary.

Compensated absencesAccrual for compensated absences is made to the extent of the value of accrued absences of the employees at the balance sheet date

using their current salary levels.

4.10. Trade and other payablesLiabilities for trade and other payables are carried at cost which is the fair value of the consideration to be paid in future for goods and

services.

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4.11. ProvisionsProvisions are recognised when the Company has a present legal or constructive obligation as a result of past events and it is probable

that an outflow of resources embodying economic benefits will be required to settle the obligation and a reliable estimate of the obligation

can be made.

4.12. TaxationCurrentThe charge for current taxation is based on taxable income at the current rate of taxation after taking into account applicable tax credits,

rebates and exemptions available, if any or minimum taxation at the rate of one-half percent of the turnover whichever is higher. However,

for income covered under final tax regime, taxation is based on applicable tax rates under such regime.

Deferred

Deferred income tax is provided using the liability method for all temporary differences at the balance sheet date between tax bases of

assets and liabilities and their carrying amounts for financial reporting purposes.

Deferred income tax asset is recognised for all deductible temporary differences and carry forward of unused tax losses and unused tax

credits, if any, to the extent that it is probable that future taxable profit will be available against these can be utilised. The Company

recognizes deferred tax liability on surplus on revaluation of fixed assets which is adjusted against the related surplus.

Deferred income tax assets and liabilities are measured at the tax rate that is expected to apply to the period when the asset is realised

or the liability is settled, based on tax rates that have been enacted or substantively enacted at the balance sheet date. In this regard, the

effects on deferred taxation of the portion of income expected to be subject to final tax regime is adjusted in accordance with the

requirement of Accounting Technical Release - 27 of the Institute of Chartered Accountants of Pakistan, if considered material.

4.13. Foreign currency translationsTransactions in foreign currencies are translated into Pak Rupees (functional currency) at the rates of exchange approximating those

appearing on the dates of transactions. Monetary assets and liabilities denominated in foreign currencies are translated into Rupees at

the rates of exchange approximating those prevailing at the balance sheet date. Any resulting gain or loss arising from changes in

exchange rates is taken to profit and loss account.

Exchange differences are accounted for as follows:

i) Exchange differences on translation of foreign currency loans utilized for acquisition of fixed assets are added to or deducted from the

carrying amounts of the respective assets in case of loans obtained prior to July 05, 2004 and are allowed to be capitalized upto

September 30, 2007 in accordance with the Circular no. 1 of 2005 dated January 19, 2005 issued by the SECP; and

ii) All other exchange differences are taken to the profit and loss account.

4.14. Financial instrumentsAll financial assets and liabilities are recognized at the time when the Company becomes party to the contractual provisions of the

instrument. Financial assets are derecognized when the Company loses control of the contractual rights that comprise the financial asset.

Financial liabilities are removed from the balance sheet when the obligation is extinguished, discharged, cancelled or expired.

Any gain / (loss) on the recognition and derecognition of the financial assets and liabilities is included in the profit / (loss) for the period

in which it arises.

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4.15. Derivative financial instrumentsThese are recognized in the balance sheet at fair value. All derivative financial instruments are carried as assets when fair value is positive

and liabilities when fair value is negative.

Any gains or losses arising from change in fair value of derivative that do not qualify for hedge accounting are taken directly to net profitor loss for the year.

4.16. Offsetting of financial assets and financial liabilitiesA financial asset and a financial liability is offset and the net amount is reported in the balance sheet if the Company has a legally

enforceable right to set-off the recognised amounts and intends either to settle on a net basis or to realise the asset and settle the liability

simultaneously. Corresponding income on the asset and charge on the liability is also off set.

4.17. Revenue recognition- Revenue from sale is recognized when the significant risks and rewards of ownership of the goods have passed to the customers, which

coincide with the dispatch of goods to customers.

- Return on bank deposits is recognized on time proportion basis.

- Scrap sales are recognised on physical delivery to customer.

- Other revenues are accounted for on accrual basis.

4.18. Borrowing costsBorrowing costs incurred on finances obtained for acquisition of operating fixed assets are capitalized upto the commencement of

commercial production of the respective assets. All other borrowing costs are charged to profit and loss account as and when incurred.

4.19. Impairment

At each balance sheet date, the carrying amount of assets is reviewed to determine whether there is any indication that those assets havesuffered an impairment loss. If any such indication exists, the recoverable amount of the asset is estimated in order to determine the extent

of the impairment loss, if any. Impairment losses are recognized as expense in the profit and loss account.

4.20. Dividend and appropriation to reservesDividend and appropriation to reserves are recognised in the financial statements in the period in which these are approved.

4.21. Related party transactionsAll transactions with related parties are carried out by the Company using the methods prescribed under the Companies Ordinance,

1984.

Note 2007 2006(Rupees in '000')

5. PROPERTY, PLANT AND EQUIPMENTOperating fixed assets 5.1 7,509,855 7,075,726Capital work in progress 5.2 785 607,665

7,510,640 7,683,391

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35

COSRUO

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Wre

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36

511

Additions

toplantandmachineryarenetoffexchangegain

amountingtoRs.35.101million(2006:Rs.17.905million)arisingonforeigncurrencyloans.

512

Deprecia

tionfortheyearhasbeenallocatedasfollows:

Ne

2

2

(R

in'0)

Costofsales

31

36

269,459

Distributioncost

32

24

1,439

Adm

inistrativeexpenses

33

44

3,737

Raw

materialconsumed

31.1

12

2,800

37

277,435

513T

hefollowingfixedassetsweredisposedoffduringtheyear.

Pca

C

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e

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o

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e

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Refrigerator

100

3

97

97

-

Com

panyPolicy

Mr.AbbassRaza

Ex-employee

AirCond

itioner

75

2

73

73

-

Com

panyPolicy

Mr.PervaizAhmed

Ex-employee

Compute

r

136

74

62

62

-

Com

panyPolicy

Mr.Khadim

HussainAlvi

Ex-employee

Compute

r

130

75

55

31

(24)

Nego

tiation

Mr.JavedAliKhan

Employee

MiniBus

Mitsubishi(KBA-6881)

1,569

575

994

812

(182)

Nego

tiation

Mr.ZahidSiddiqui

Employee

Aggregateamountofassetsdisposedoffhavingbookvalue

less

than

Rs.50,000/-each

5,129

4,856

273

3,199

2,926

2

71

55

15

42

27

2006

1,039

883

156

636

480

514

Hadtherebeennorevaluation,thewrittendownvalueofth

erevaluedassetsinthebalancesheetwouldhave

beenasfollows:

2

2

(R

in'0)

Plan

tandmachinery-I

244

2,657,451

Coa

lfiringsystem

19

209,409

264

2,866,860

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5.2 CAPITAL WORK-IN-PROGRESSTransferred

Note Opening to operating Closingbalance Additions fixed assets balance

(Rupees in '000')Plant expansionPlant and machinery - owned 5.2.1 523,555 153,757 677,312 -

Factory buildingCivil works 84,108 55,533 138,856 785

607,663 209,290 816,168 785

5.2.1. Includes borrowing costs amounting to Rs. 8.907 million (2006: Rs. 84.906 million), capitalized during the year.Note 2007 2006(Rupees in '000')

6. LONG TERM LOANS - secured, considered goodHouse building loan to:

- Executives 6.1 & 6.3 7,770 4,533- Employees 1,012 1,753

8,782 6,286Motorcycle loan to employees 6.2 78 292

8,860 6,578Less: Current portion 11 1,612 1,514

7,248 5,0646.1. House building loans are secured against retirement benefits due to executives and are repayable in 96 monthly installments. These loans

carry interest @ 5 percent (2006: 5 percent) per annum. Maximum aggregate amount due from executives at the end of any month during

the year was Rs. 7.208 million (2006: Rs. 7.147 million).

6.2. Motor cycle loans are secured against retirement benefits due to employees and are repayable in 36 monthly installments. These loanscarry no interest.

Note 2007 2006(Rupees in '000')6.3. A reconciliation of the house building loans to

executives is as follows:Opening balance 4,533 5,512

Additions 4,111 197Repayments 874 1,176Closing balance 7,770 4,533

7. LONG TERM DEPOSITSSecurity deposits

- Utilities 35,730 35,730- Leasing companies 91,217 61,766- Others 1,320 1,313

128,267 98,809Less: Current portion of security deposits to leasing companies 1,950 1,300

126,317 97,509

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Note 2007 2006(Rupees in '000')8. STORES, SPARE PARTS AND LOOSE TOOLS

Stores 112,886 105,450Spare parts 282,275 248,642Loose tools 14,371 13,233

409,532 367,325Spare parts in transit 7,054 8,533

416,586 375,8589. STOCK-IN-TRADE

Raw material 16,480 23,609Packing material 13,978 12,457Work in process 110,600 44,196Finished goods 9,235 16,495

150,294 96,75710. ASSETS HELD FOR DISPOSAL

This includes fuel burner and coal grinding mill from which no future economic benefits are expected from their use. Accordingly, the

management has decided to dispose off these assets in the near future. These assets are carried at lower of their carrying amounts and fair values

less estimated cost to sell.

The fair value of these assets is Rs. 33.880 million (2006: Rs. 35.2 million) as valued by an independent valuer.

Note 2007 2006(Rupees in '000')11. LOANS AND ADVANCES - considered good

Loans - securedCurrent portion of long term loans 6 1,612 1,514Advances - unsecured

Executives 1,385 1,747Employees 2,915 2,572Margin against letters of credit 4,049 3,634Suppliers, contractors and service providers 14,668 8,132

23,017 16,08524,629 17,599

12. TRADE DEPOSITS AND SHORT TERM PREPAYMENTSTrade deposits 400 600Short term prepayments 641 950

1,041 1,55013. OTHER RECEIVABLES

Export rebate - 1,194Others 229 562

229 1,756

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Note 2007 2006(Rupees in '000')14. CASH AND BANK BALANCES

Cash in hand 777 1,168With banks in:Current accounts

- Local currency 14.1 304,604 70,626- Foreign currency 57 57

304,661 70,683Deposit accounts

- Local currency 41 41- Foreign currency 13 13

54 54304,715 70,737305,492 71,905

14.1. These carry profit rates ranging from 0.75 percent to 2.5 percent (2006: 0.75 percent to 2.5 percent) per annum.15. AUTHORIZED SHARE CAPITAL

2007 2006 Note 2007 2006No. of Shares in (000) (Rupees in '000')200,000 200,000 Ordinary shares of Rs. 10/- each 2,000,000 2,000,00050,000 50,000 Preference shares of Rs. 10/- each 500,000 500,000250,000 250,000 2,500,000 2,500,000

16. ISSUED, SUBSCRIBED AND PAID-UP CAPITALOrdinary shares of Rs. 10/- each

143,156 143,156 Fully paid in cash 1,431,557 1,431,55711,590 11,590 Issued as fully paid against outstanding loan liability 115,909 115,90915,068 7,737 Issued as fully paid bonus shares 16.3 150,682 77,373169,814 162,483 1,698,148 1,624,839

16.1.Under an agreement, Industrial Development Bank of Pakistan (IDBP) had a right to subscribe for and receive preferential allotment ofshares at face value upto 20 percent of its outstanding loan amount. The SECP (then CLA) had disallowed IDBP to exercise this option in

the past.

16.2.69,906,235 (2006: 76,717,359) ordinary shares of Rs.10/- each are held by the related parties as at June 30, 2007.16.3. The bonus shares were issued during the year to the share holders in the proportion of 4.51 ordinary shares per 100 ordinary shares held

amounting to Rs.73.309 (2006: Rs. 77.373) million out of the share premium account under Section 83 (2)(d) of the Ordinance and

were approved by the members at the Annual General Meeting held on October 31, 2006.

39

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Note 2007 2006(Rupees in '000')17. SURPLUS ON REVALUATION OF

FIXED ASSETS - net of taxGross surplusOpening balance of surplus on revaluation of fixed assets 929,758 968,176Transferred to unappropriated profit in respect of

incremental depreciation charged during the year (43,999) (38,418)885,759 929,758

Less: Deferred tax liability on :Opening balance of revaluation 325,416 338,862Incremental depreciation charged on related assets (13,860) (13,446)

23.3 311,556 325,416Closing balance of surplus on revaluation of fixed assets 574,203 604,342

17.1. The plant and machinery and coal firing system of the Company were revalued by an independent valuer M/s Sipra and Company onthe basis of professional assessment of present market values in financial year ended June 30, 2005.

Note 2007 2006(Rupees in '000')18. LONG TERM FINANCING - Secured

From banking companies and other financial institutions:Bank of Punjab 18.1 - 250,000From a Syndicate 18.2 37,500 50,000Bankers Equity Limited - under liquidation (BEL)

Term Finance Certificates (TFCs) 18.3 140,848 171,403178,348 471,403

Less: Current portion of:

- From a Syndicate 37,500 -- Bankers Equity Limited - under liquidation (BEL)

Term Finance Certificates (TFCs) 68,245 40,740105,745 40,74072,603 430,663

18.1. During the year, the loan was adjusted against a new finance facility acquired by the Company amounting to Rs.500 million disbursedon June 30, 2007. The facility was taken at the mark-up rate of 3.5 percent above 3 months KIBOR. The loan was secured by

hypothecation over the Company's all present and future current assets and personal guarantees of sponsoring directors.

18.2. The syndicate consists of First Credit and Investment Bank Limited (FCIBL) and ORIX Investment Bank Pakistan Limited (OIBPL) bothhaving equal share in the syndicate. The facility is secured by ranking charge by way of hypothecation over the Company's entire presentand future current assets, demand promissory note and guarantees of the sponsoring directors in favour of syndicate members.

The terms of repayment are as follows:

FCIBL OIBPLRate of interest 4 percent plus 6 months KIBOR 4 percent plus 6 months KIBOR

Interest repayments Monthly Quarterly

Principal repayments Bullet payment in September 2007 4 equal quarterly installment of

Rs. 6.25 million starting October 2006

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18.3. Following are the terms and conditions of rescheduled loan as approved by the High Court of Sindh in 2004:Repayment September 30, 2004 to June 30, 2009

Number of installments 20 quarterly installments

Rate of mark up 4.67 percent per annum

Delay in payment of installments Additional mark up at the rate of 12 percent of the overdue amount

The TFCs are secured by creation of an equitable mortgage and first floating charge on all the properties and assets of the Company

ranking pari passu with the mortgages, floating charges and hypothecation created in favour of other lenders. In case of default of any

payment by the Company, BEL has irrevocable right to revert the rescheduled loan. The construction period mark up and other charges

on TFCs (Note 23) have been frozen and will be paid during September 2006 to June 2009.

The original agreement provided that in the event of the rate of return falling below the minimum prescribed percentages, BEL has the

option to convert 20 percent of the outstanding TFCs into fully paid ordinary shares of the Company at par value. This option is no more

exercisable as per rescheduling approved by the High Court of Sind in 2004.

19. LIABIL ITIES AGAINST ASSETS SUBJECT TO FINANCE LEASERepresents finance leases entered into with leasing companies for plant and machinery and vehicles. Total lease rentals due under various lease

agreements aggregate to Rs. 848.445 million (2006: Rs. 717.393 million) and are payable in equal monthly / quarterly / semi-annual

installments latest by October 17, 2011. Overdue rental payments are subject to an additional charge upto 3 percent per month. Taxes, repairs,

replacement and insurance costs are to be borne by the Company. In case of termination of agreement, the Company has to pay the entire rent

for the unexpired period. Financing rates of approximately 13.5 percent to 15 percent (2006: 9 percent to 12 percent) per annum have been

used as discounting factor. The finance lease liability is as follows:

2007 2006Minimum Minimumlease Present lease Present

payments value payments value(Rupees in '000')

Upto one year 301,242 225,440 191,271 133,585One year to five years 547,203 486,577 526,123 454,070848,445 712,017 717,394 587,655Less: Finance charges allocated to future periods 136,428 - 129,739 -

712,017 712,017 587,655 587,655Less: Current maturity 225,440 225,440 133,585 133,585

486,577 486,577 454,070 454,07020. LONG TERM MUSHARAKA FINANCE

Represents Musharaka finance facility obtained by the Company from First Dawood Investment Bank Limited, a related party, carrying profit rate

of 15 percent per annum. The facility is repayable on December 31, 2008 with quarterly payments of profit and is secured by way of

hypothecation of stocks in trade and receivables of the Company. Initially the facility was payable by December 31, 2006.

Note 2007 2006(Rupees in '000')

21. LONG TERM DEPOSITSFrom employees 21.1 4,012 5,007From suppliers and distributors 1,235 620

5,247 5,62721.1. Represents amount received from employees under car replacement scheme of the Company.

22. LONG TERM CREDITOR - unsecuredContractor 22.1 29,008 35,008Less: Current portion 25.2

7,5116,00021,497 29,008

22.1. Represents payable to contractor of the expansion project. The contractor has agreed to receive its outstanding liability in monthlyinstallments of Rs 0.5 million per month. The said balance is interest free.

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Note 2007 2006(Rupees in '000')23. DEFERRED LIABILITIES

Deferred interest / mark upBankers Equity Limited - TFCs 18 133,183 149,518Asian Development Bank 24.1 91,973 98,273Bankers Equity Limited - LMM 24.3 39,852 46,326National Bank of Pakistan (Former NDFC) 24.4 & 23.1 539,043 577,546Industrial Development Bank of Pakistan 24.6 53,887 56,887

857,938 928,550Less: Current portion 247,501 130,390

610,437 798,160Defined benefit plan 23.2 73,409 64,707Deferred taxation 23.3 326,741 435,989

1,010,587 1,298,85623.1. It carries service fee at the rate of 2 percent (2006: 2 percent) per annum on the outstanding mark up as at June 30, 2003, payable in

semi annual installments till June 30, 2013.

23.2. Defined benefit plan23.2.1. The amount recognised in the balance sheet is as follows:

Present value of defined benefit obligation 88,370 82,560Unrecognised actuarial loss (14,961) (17,853)Liability recognis

pioneer cement 2007-2006

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